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Huge investment needed to harness 'dining boom'

A report shows there is significant opportunity for agribusiness to be part of the next wave of prosperity for Australia, but it will take significant investment, including from overseas.

Tara De Landgrafft

Substantial foreign investment in Australian agriculture and agribusiness will be vital to the nation's future prosperity, according to a report released by Deloitte.

The report looks at options to fuel Australia's economic growth as the mining boom fades, and names agribusiness as one of five sectors that together, could generate the 'next wave' of national wealth.

It finds that Australia has a range of natural advantages that put it in a unique position to meet demand, created as the rapidly expanding Asian middle class looks for higher-quality, higher-value food.

That includes Australia's proximity to Asia, its status as a stable and reliable supplier of food, and even its currency, with Deloitte predicting that the Australian dollar will settle closer to being worth 80c against the USD over the longterm.

But while Australia can hope to pick up some expanded markets without doing too much, Deloitte's national agribusiness leader, Rob McConnel says that fully capitalising on the boom will require hundreds of billions of dollars in investment in the ag sector.

The report says $400 billion in equity will need to be injected into the industry, as Australia's family farms are handed over by a retiring generation of owner-managers. An additional $600 billion will need to be spent by 2050 to improve farm productivity, the report finds.

"A real question for industry is where that capital is going to come from," says Mr McConnel, who points to the difficulties of attracting agribusiness investment through the stock market and from institutional investors, who typically take a shorter-term view of returns than agriculture is able to provide.

"Absolutely. Foreign investment will be required, and it will have to play a role in the growth of Australian agribusiness as we ride this next wave," he said.

"The question is, how do you do that in a way that is sensitive to all stakeholders? Whether that's increasing transparency, or working through the machinations of what is required to happen, the global capital is there and it is willing to invest. We just need to make ourselves a willing participant."

Mr McConnel says attracting investment from overseas doesn't mean that Australia would be sending the profits of this 'next wave of prosperity' off-shore.

"We shouldn't be shy of capital investment [from overseas], because that will ring true for investment in the industry which will drive employment, and the Australian economy should still benefit from that.

"Of course if you talk about an exiting, whether it's shareholders or people on an actual farm exiting, then they're the recipients of that capital investment, they are the beneficiaries," he said.

"I don't think we should be overly concerned about where and how that should work, because ultimately it should flow to the Australian economy in a number of ways."

The next decade is the critical period, according to the report, during which significant steps should be made, including investing in productivity gains on farms, and in infrastructure including rail to transport produce.

Mr McConnel says that if Australian government and business can do that, agribusiness, together with the gas, tourism, international education and wealth management sectors, could form the next wave of economic development in Australia.

"Of those five super-sectors, agribusiness, gas, tourism, higher education and wealth management, we see that collectively, over the next 20 years, an additional $250 billion could be added to the national economy over that time.

"We will get some of that naturally. In terms of that step-change though, in terms of fulfilling the full advantage, the real challenge for industry is in the next 10 years, otherwise the opportunity could be lost."